BENNINGTON — A 2 percent cut to Medicare payments, part of what are known as the sequester cuts, is expected to cost Southwestern Vermont Health Care $1 million in annual revenue, according to Thomas Dee, the CEO of SVHC.

On Monday, at a meeting between local business leaders and Gov. Peter Shumlin, Dee said the hospital would see a loss of $1 million, which is only the effect of the sequester locally.

The pinch for local hospitals is coming from a 2 percent cut in Medicare payments.

M. Beatrice Grause, president and CEO of the Vermont Association of Hospitals and Health Systems, said Friday their most recent estimate was that the sequester will result in a $12.6 million loss of revenue for hospitals across Vermont.

Kevin Robinson, a spokesman for the health care system and its Bennington hospital, Southwestern Vermont Medical Center, said the 2 percent cut affects physicians and “every health care service you can think of.”

To put the loss of revenue into context, Robinson said the hospital’s annual budget was about $160 million, but the hospital’s operating margins were about $4 million.

He pointed out that even though the health care system is a not-for-profit, they don’t break even every year. The operating margins would include the money needed for replacing equipment or giving employees raises.

The sequester cut began on April 1, which is the start of the second half of SVHC’s fiscal year, so officials at the health care system are anticipating a reduction in revenue of half a million dollars from the current fiscal year.

“The situation with Medicare is not made any easier by what’s going on at the state level. The Green Mountain Care Board is very determined to hold down increases in expenses in the health system, really, in health care in the state as a whole. We’re certainly not sure if the Green Mountain Care Board would allow us to build that 2 percent (loss) into a rate increase next year that would allow us to recoup some of that from private insurance payers,” Robinson said.

According to Robinson, SVHC anticipated since November declines in government payments and has been working to reduce expenses.

“We’re looking at both supply and labor expenses,” he said.

Another complication for health care systems is the cuts come at a time when the industry is trying to transform itself and move from a model of being paid for services that are essentially given when a patient is sick or hurt to being paid for services that keep people healthy.

“To do this, we need to make some investments in the industry in things like updated facilities and electronic medical records. These payment cuts will hurt our ability to make these types of investments that will lead to lower health care spending long term,” Robinson said.

Grause said her organization, VAHHS, was hoping to reach legislators to urge them to reconsider and make health care a priority.

“On both the federal and state level, basically our message is reform not ratcheting. ... We work with our own (congressional) delegation and they have been very supportive about preserving Medicare,” she said.

The sequester cuts may have an even stronger effect because they will hurt people who already have resources. Robinson said they will affect hospitals like SVHC and Brattleboro Memorial Hospital disproportionately to other hospitals that have fewer Medicare patients.

Some effects of the cuts have already taken place. In March, officials at Mount Ascutney Hospital in Windsor said they would close their skilled nursing facility at the end of August at least in part because of the sequester cuts.